Metered Access

Crain's Detroit Business is a metered site. Print and digital subscribers have unlimited access to stories, but registered users are limited to eight stories every 30 days. After viewing three metered stories, you'll be asked to register or log in. After eight more stories in 30 days, you'll be asked to subscribe.

Highest-paid CEOs in metro Detroit in 2013 earned their keep

These five CEOs rose to the top in an analysis of return on equity of the companies they run. According to figures tracked by Loomis Sayles via Thomson Reuters Baseline data, these five companies in 2013 tracked the highest ROE performance (the amount of net income returned as a percentage of shareholder equity). Compensation figures include bonuses, stock awards and other compensation.

They made money the old-fashioned way ...

According to various measurements, local CEOs outperform national benchmarks — if company performance is the yardstick. David Sowerby of Loomis Sayles & Co. LP used data from Thomson Reuters Baseline to develop the following data highlights:

• As of Dec. 31, 2013, the share price of the companies headed by the highest-paid CEOs was up an average of 40.3 percent for the year, compared to 29.6 percent for the S&P 500 and 30.1 percent for the S&P 1,500. Seventeen area companies beat both S&P averages

• The three-year growth in share price was up 56 percent for local companies, compared with 47 percent for the S&P 500 and 48 percent for the S&P 1,500. Twelve state companies beat both S&P averages.

• Net income for the local companies was up 23 percent in 2013, compared to 4 percent for both the S&P 500 and the S&P 1,500. Seventeen local companies beat the S&P averages.

• Three-year net income was up 16 percent for local companies, compared to 7 percent for both the S&P 500 and the S&P 1,500. Thirteen companies beat the S&P averages.

• Return on equity for the S&P 500 in 2013 was 15.9 percent, with return on equity for the S&P 1,500 at 15.4 percent. The local companies averaged 22.3 percent, with 13 local companies beating both of the S&P averages.

• Revenue at area companies was up 7 percent in 2013, compared to flat growth for the S&P 500 and 5.3 growth for the S&P 1,500. Eleven companies beat both S&P averages.

— Tom Henderson

If bringing higher stock prices to shareholders and outperforming the markets are key goals for company CEOs, then the highest-paid bosses in town have earned their money.

By all major metrics, the performance by CEOs in metro Detroit stood out in 2013, according to experts in executive compensation.

"The prime objective for executives at publicly traded companies is to deliver shareholder value, both in near-term and long-term performance. And if compensation is a byproduct of delivering shareholder value, then these CEOs have earned theirs," said David Sowerby, chief market strategist in the Bloomfield Hills office of Loomis Sayles & Co. LP.

The share price of the companies headed by the highest-paid CEOs was up an average of 40.3 percent for the year, compared to 29.6 percent for the S&P 500 and 30.1 percent for the S&P 1,500.

In addition, return on equity, a measure of net income returned as a percentage of shareholder equity, also beat the S&P averages. The average 12-month ROE of the companies tracked in the Crain's List of Top-Compensated CEOs was 22.3 percent, compared to 15.9 percent for the S&P 500.

"These CEOs have delivered, whether you look at what the stock price has done, return on equity or earnings. Companies here have outperformed those nationally," he said.

David Sowerby, Loomis Sayles & Co. LP

"They have outperformed the market as a whole, in every metric. You connect the dots between performance and compensation, whether you're a CEO or you're a PGA professional. If you don't make the cut on the PGA tour, you don't get paid," said Sowerby. (See data highlights box at right)

The highest-compensated local executives got paid well, though, perhaps surprisingly, less than in 2012.

The biggest CEO earners

The top 25 execs in 2013 were paid a total of $189.9 million, which is off 39 percentage points from the $311.2 million that the top 25 were paid in 2012. But that 2012 number was driven in large part by two things: One was a reward in compensation for executives for what was a fantastic bull market and a sharp run-up in stock prices. The other was an outlier in the form of compensation for Brett Roberts, the CEO of Credit Acceptance Corp. of Southfield.

In 2012, his board of directors initiated a 15-year performance plan for him that could reward him with $53.3 million in stock awards. Whether they eventually were collected or not, for accounting purposes, they were listed as 2012 compensation.

Roberts is not in the top 25 this year, nor are nine others from the top 25 of 2012. If you compare what the top 25 CEOs were paid in 2013 with what those same 25 executives were paid in 2012, the decline in compensation is much less, off 2.66 percentage points from $195.1 million.

Roberts' pay total of $54.2 million in 2012 was more than double the $26.2 collected by John Plant of TRW Automotive Holdings Corp. Plant took over the No. 1 spot in 2013 despite a drop in pay to $24.5 million, which included $4.6 million in stock awards and $12.8 million in nonequity incentive and retirement compensation.

Alan Mulally of Ford Motor Co. moved up a spot to No. 2 in 2013, his overall pay of $23.2 million including $10.9 million in stock awards and $3.9 million in nonequity incentive and retirement compensation. He has announced he will retire July 1.

The other 13 who repeated as members of the top 25 were: Richard Dugas of PulteGroup Inc.; Rodney O'Neal of Delphi Automotive plc; Matthew Simoncini of Lear Corp.; Timothy Wadhams of Masco Corp. (who retired in February of this year); Patrick Doyle of Domino's Pizza Inc.; Gerard Anderson of DTE Energy Co.; Daniel Akerson of General Motors Co. (who retired in January); Joseph Welch of ITC Holdings Corp.; Roger Penske of Penske Automotive Group Inc.; Robert Taubman of Taubman Centers Inc.; Timothy Leuliette of Visteon Corp.; Charles McClure Jr. of Meritor Inc. (who resigned in May 2013); and Jeffrey Edwards of Cooper-Standard Holdings Inc.

Sudip Datta, a professor of finance and interim chairman of the department of finance in the School of Business Administration at Wayne State University, said that, for the most part, compensation mirrored company performance last year.

"In general, the total compensation for most of the firms is consistent with net income change. It was what you'd expect," he said.

There were exceptions to the net income-salary correlation.

James Verrier of BorgWarner Inc. saw his total compensation climb from $3.2 million to $8.1 million, even though the company's net income fell from $500.1 million to $218.3 million. Part of his increase was in stock awards for previous performance, which went from $1.5 million to $4.8 million, and a boost in nonequity incentive and retirement compensation, which went from $954,614 to $2.1 million.

David Dauch's compensation at American Axle and Manufacturing Holdings Inc. went from $4.2 million to $6.3 million while his firm's net income fell from $367.7 million to $94.5 million. He had increases in his base salary from $873,333 to just more than $1 million; in stock awards from $979,013 to almost $1.8 million; and in nonequity incentive and retirement compensation from $2.3 million to $3.4 million.

Simoncini's compensation rose from $10.1 million to $10.8 million while net income for Lear fell from 1.3 billion to $431.4 million. And Edward Christian's compensation at Saga Communications Inc. went from $1.6 million to $2.6 million while net income dropped from $17.9 million to $15.3 million.

Paul Reagan, a senior lecturer in the School of Business Administration at Wayne State and a principal in the Birmingham-based compensation consulting firm of Dorey-Reagan & Associates LLC, said CEO compensation in 2013 continued three trends that emerged during the recovery of the Great Recession: a moderation in both base salary and cash incentive payments and a growth in compensation driven by stock awards.

Pay for performance

"Companies are willing to provide their executives with the means to participate in the continued resurgence of the equity markets via stock grants and stock option awards," Reagan said. "These grants are not only a means of compensation — they also serve to promote shareholder interests by more closely establishing the executives as shareholders themselves."

Total base salaries for the top 25 CEOs in 2013 was $26.1 million, down 7 percent, or $2 million, from 2012. Plant had the highest base salary, just more than $2 million.

Cash bonuses were off 50.6 percent to $3.9 million. Mulally had the highest bonus, almost $2 million.

Reagan said executives can expect in coming years to see their base salaries remain low compared to prerecession salaries, for bonuses to remain constrained and for stock awards based on defined targets — set by the board — to continue to serve as a big carrot.

Last year, stock awards totaled $78.4 million, off $77.4 million, or about 50 percent from 2012, but that decline is an anomaly; award totals in 2012 were something of an outlier, reflecting the big rise in stock prices. Stock awards in 2012 were up 201.9 percent from 2011.

Mulally had the largest stock award, more than $10.9 million. He continues to reap the benefit of keeping Ford out of bankruptcy during the recession and for what is generally regarded as a highly successful stint in his nearly eight years at the helm of the automaker, although Ford was something of a relative underperformer in 2013.

Its share price gain was 19.2 percent and revenue growth was 3.4 percent, both below local company averages and national averages. Return on equity was 32.5 percent, which was above both local and national averages, and earnings growth was 14 percent, below the local average but above the national average.

"We saw an incredible story at Ford," said Reagan, taking a longer-term view of Mulally's reign. "Rarely do you see that kind of performance by a CEO. It gives you faith in executive performance. It really does."